Monday, December 8, 2008

Scary. And Funny. And a Random/Spontaneous Discussion of Bankers' Pay.

I had to dash out this morning and fly to Columbus, OH, for meetings but I did manage to capture the scariness above.  Dipping into the teens is when I officially go into hibernation, so I guess I will see you all on the other side of the winter.

The truly amusing piece of news today was that the CEO of Merrill - an institution I thought was practically non-existent - proposed a $10 million bonus for himself.  I had long been annoyed that while banks received bailout money without hardly any light being shed on their compensation practices, there has been considerable discussion of how the US auto workers get paid so much more than any other workers, and whether we should be supporting such an inefficient industry.  And for the CEO of a virtually extinct institution to ask for this kind of bonus was quite amusing.  So I am happy to see that by the end of the day he was forced to give up the hopes of getting anything - and I am not terribly worried about him.

PS.  Just to be sure, I don't think there is a clear case to be made for bankers to get paid less (that is if we suddenly decide that the government has the power to regulate their pay.. which it potentially could since it, you know, owns them).  Felix Salmon has suggested that here and he's not alone.  Even as an ex-banker that thought has crossed my mind.  Truth is, finance dudes may seem overpaid, but - unlike auto workers - are running a significantly higher risk of getting culled when times turn sour.  And it doesn't take a whole lot for that to happen.  For the most part, they are employed "at will" which means they can be fired at any time with no reason whatsoever.  This is not a lament; far from it.  This is how banks deals with fluctuations in business: when times go bad, they cut, fire, and lay off until they return a positive bottom line; when times are good or a new business opportunity opens up they hire aggressively - and to attract talent quickly without many specific guarantees for longetivity - they pay up.  In other words, generous pay is the tool that banks use as a headcount control tool.  

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